H221 Tourism Rebound To Narrow Barbadian Current Account Deficit

• The return of tourism activity in H221 will boost services exports and narrow Barbados’ current account deficit in the quarters ahead. Importantly, the island saw the resumption of cruise travel this week, which augurs well for growth in the sector. 
• The near-complete cessation of tourism activity in the final three quarters of 2020 due to the COVID-19 pandemic, significantly widened Barbados’ current account deficit. From 2015 to 2019, Barbados ran an average current account deficit of 4.1% of GDP but the deficit widened to 6.1% in 2020. 
• The economy is highly reliant on tourism and other service exports to offset wide goods and primary income account deficits, and the services trade surplus shrank to USD0.8Bn in 2020, from an average of USD1.1Bn from 2015 to 2019. 
• However, a broader economic recovery will increase Barbadian import demand, which will widen the goods trade deficit in 2021 and the years thereafter. 
• Fitch Solutions has revised its 2021 current account deficit to 4.9% of GDP, from 3.9% previously, as a slower-than-expected rebound in tourism activity in Q1 2021 leads to a wider current account deficit. The deficit is expected to narrow to 3.1% of GDP in 2022.

(Source: Fitch Solutions)